BANKING AFFAIRS

Detailed explanation-1: -It is also known as the Capital to Risk (Weighted) Assets Ratio (CRAR). In other words, it is the ratio of a bank’s capital to its risk-weighted assets and current liabilities. This ratio is utilized to secure depositors and boost the efficiency and stability of financial systems all over the world.

Detailed explanation-2: -The capital adequacy ratio, also known as capital-to-risk weighted assets ratio (CRAR), is used to protect depositors and promote the stability and efficiency of financial systems around the world.

Detailed explanation-3: -The capital adequacy ratio is calculated by dividing a bank’s capital by its risk-weighted assets.

Detailed explanation-4: -Risk-weighted assets, or RWA, are used to link the minimum amount of capital that banks must have, with the risk profile of the bank’s lending activities (and other assets). The more risk a bank is taking, the more capital is needed to protect depositors.

Detailed explanation-5: -The capital adequacy ratio (CAR) is a measure of how much capital a bank has available, reported as a percentage of a bank’s risk-weighted credit exposures. The purpose is to establish that banks have enough capital on reserve to handle a certain amount of losses, before being at risk for becoming insolvent.